Global Grain Stocks Tighten

Using global stocks to consumption ratios for corn, soybeans, and wheat since 2000 shows how grain stocks have tightened in recent years. While they generally remain above the lows observed roughly a decade ago, they are down from their recent high of 33% in 2016/17 but considerably above the 2010/11 low of only 13%.

Any analysis of global grain stocks often requires us to consider China’s impact on global inventories, which accounts for a significant and growing share of global ending stocks. For corn, China’s ending stocks account for roughly 70% of the global total, up from around 30% in the mid-2000s. The trend is the same for wheat and soybeans, where China represents 50% and 35% of ending stocks, respectively.

On the one hand, the upturn in ending stocks could signal China has frontloaded purchases and might not need to buy as much in the future. There could also be data quality issues. Either way, China is a net consumer of these crops and, as a result, those stocks are likely unavailable for global trade. In other words, China is unlikely to export these crops, so we should consider removing them from the global inventories when thinking about overall availability.

The global stocks situation, less China, highlights how China’s increase in stocks has impacted global stocks. For corn, current stocks are at 8% of consumption, again trending lower in recent years. However, the current level is only slightly more abundant than the 2012/13 lows of 7%. Since 2000, the consumption ratio has averaged 10%.

Similarly, China’s increasing share of global stocks makes the soybean and wheat situations appear less abundant than what might initially seem to be the case. Soybeans, currently at 16%, are well below the long-run average (21%), and wheat stocks are at 18% of consumption, slightly below the long-run average of 19%.

Figure1. Global Stocks to Consumption Ratio, Less China, Corn, Soybeans, and Wheat. 2000/01- 2021/22. Data Source: USDA.

So, just how tight are global grain stocks? It depends on how one measures and accounts for China’s large and growing share of global inventories. As earlier discussed, it’s up for debate if these grains are truly available for global trade. However, China is a large global consumer of these crops, and large inventories could signal less aggressive purchases will be necessary in the future.

It’s important to keep in mind that ending stocks are often the most difficult value for the USDA – or anyone – to estimate.

EDITOR’S TAKE:

Let’s see if we can boil this down a little and bring the hay down where the cows can eat it – as we used to say on the farm! Ending stocks of grain is an important measure of how close we are to a shortage or a surplus. If grain stocks are tight, grain prices escalate to reflect that situation. Similarly, when there is a surplus, grain prices dip. This article suggests that China is stockpiling grain for the future and by doing so has really created very low ending stocks of the grains mentioned. That means if there is a weather problem, a crop has poor yield performance or if there is trouble during harvest, grain prices will spike upwards in a significant manner. That could be good or bad depending on where you sit in the supply chain. It is definitely something to keep in mind as we proceed through the 2022 growing season, especially since we are already under a great deal of inflationary pressure!